…Reduces oil benchmark to $30 per barrel
…Places ban on employment in MDAs
By Johnbosco Agbakwuru
THE Federal Government yesterday announced the reduction of N1.5 trillion from the 2020 budget of N10. 59 trillion. The government also placed a ban on recruitment of workers into Ministries, Departments and Agencies.
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, disclosed this while briefing State House correspondents at the end of the Federal Executive Council, FEC, meeting presided over by President Muhammadu Buhari at the Council Chamber, Presidential Villa, Abuja.
The Minister announced the 20 percent cut on the capital expenditure of the 2020 budget as well as the 25 reduction of the recurrent expenditure.
She said: “We should cut down on the size of the federally funded upstream projects of the Petroleum sector. The reason being that we want to be able to receive more revenue by less reduction from NNPC.
“The reduction of the crude oil price from $57 per barrel to $30 means that we are going to get so much less revenue, almost 45 percent loss as we planned.
“And because of that, we have to amend a number of projections in the budget as well as in the MTEF to reflect our current reality.
“We also need to adjust Customs revenue which has been budgeted at N1. 5 trillion but we are adjusting it downwards because we anticipate that trade volumes will reduce and once trade volume is reduced, Customs revenue will be significantly impacted as a result.
“On the expenditure size, the President has approved that we cut down capital expenditure by 20 percent across Ministries, Departments and Agencies and also on 25 percent cut on all government-owned enterprises.
“This includes the ones that are in the national budget, the ten top ones that we included in the 2020 budget but also the ones we didn’t include in the 2020 budget.
“The administration is to stop recruitment except for essential services such as security and health services and to also comply with the civil service retirement regulations.”
Speaking further, she said: “What we have done is that we have written every ministry and given them guidelines on how these adjustments will be made to enable us have detailed imputes from them.
“But I can just say that the bulk cut is about N1.5 trillion, the reduction in the size of the budget. And this includes N457 billion from PMS under-recovery.
“On how much it affects the federally-funded upstream projects, it is about 25 percent cut. The exact amount will be worked out when we get inputs from the ministries, departments and agencies.”
On concerns of the economy slipping back into recession, she said: “Of course, we have concerns. This is resulting in about 40 to 45 percent reduction and also it will affect states because it means FAAC will be significantly reduced.
“FAAC is just a pool of funds and we share what is realized, so it will affect the states as well. So we are expecting the states to take similar measures to amend the plans that we have made and bring them down to current realities.
“On plans to scale back VAT and excise duty, I am not making any commitment on that right now because these are provisions in the law in the Finance Act and as you know, we will, even in the amendment to the MTEF and the budget, have to engage with the National Assembly.
“The fiscal authorities are working with the fiscal authority team and we will get the President’s approval before we come up with what we will announce to the public.
“On recruitment, there is already an instruction to stop recruitment. What the agencies have been doing is replacement but even that is being suspended.
“When things improve, we will go back to the issue of recruitment but for now, our wage bill is already very high. The president has directed that salaries and pensions must be paid unfailingly, so we are not looking at downsizing in anyway. We are maintaining our workforce as it is but we are just stopping the increase in the size of the nominal roll.”
Speaking on the benchmark, she said: “On benchmark, we are working on the worse case scenario of $30 per barrel and also we are holding on to the production numbers of 2.18 million barrels per day. This, you will remember, is approved by the National Assembly.”